Retail in Asia

In Shops

Japan’s Rakuten losing shine as business model grows rusty

Rakuten Global Market Shop from Japan

E-commerce pioneer Rakuten is showing its age, failing to keep pace as sprightlier rivals ride shifting consumer currents and hatch novel services appealing to online shoppers drawn to convenience and word-of-mouth marketing.

The 20-year-old Japanese internet giant’s group operating profit slid 12% on the year to 48.7 billion yen ($481 million) for the January-June half. Profit in domestic e-commerce operations tumbled 25% to 17.5 billion yen in the second quarter, even as their revenue rose 7% to 72.5 billion yen.

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President Hiroshi Mikitani has demanded that the segment produce 40% annual growth. But removing such services as travel from the mix indicates that the core “marketplace” retail business hardly grew at all.

The marketplace, a central fixture of Japan’s internet retail sector, resembles nothing so much as an online shopping mall. Companies peddling their wares have a good deal of leeway in building their own seller pages and pay Rakuten to host these digital stores.

Mikitani has worked to make that service the center of a digital economy encompassing everything from online auctions to travel planning. But many such ancillary businesses have little new to offer and lag behind rivals as a result. There is almost no synergy to speak of among these disparate fields.